Key Components in Managing a Global Contingent Workforce Program

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1 Key Components in Managing a Global Contingent Workforce Program A TAPFIN White Paper

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3 Critical Considerations in Managing a Global Contingent Workforce Program Imagine this scenario: A large organization has experienced rapid expansion opening or acquiring an additional 50 offices globally in the past decade. To manage this growth, new processes are adopted in each location to meet hiring needs. Today, that organization has dozens of offices operating as separate entities, each with independent contingent labor procurement practices, hiring priorities, vendors and vendor management strategies, and administrative processes. Sound familiar? Decentralized processes, incompatible infrastructure, and inconsistent communication are common problems among organizations that have recently experienced substantial growth. While it may seem like a costly situation to address, it does represent an opportunity to mitigate costs, improve candidate quality, and drive efficiency across the business. The challenge is creating one global workforce management program that can provide standardized best practices and complete visibility, while still remaining flexible enough to address the nuances of local culture and legislation. Managed Service Providers (MSPs) have become widely recognized as one of the most effective vehicles to provide this international oversight of workforce program management, supply, and technology. While MSPs have been increasingly leveraged by organizations within the U.S., international markets are only now beginning to realize the benefits of MSP program deployment. In fact, over the next five years, it is estimated that the majority of new MSP adoption will be in the European, Middle East and Africa (EMEA) and Asia Pacific (APAC) regions. A global workforce program, while aligned with one set of strategic goals, must be comprised of appropriately localized regional programs designed to effectively address local requirements. Geographic Diversification of MSP Spend Under Management* Breakdown of Global MSP Spend Under Management Today Estimated Breakdown of Global MSP Spend Under Management in Five Years *Estimates based on Staffing Industry Analyst MSP Landscape, International Labour Organization, and ManpowerGroup MSP Analysis In the U.S., which has one of the most flexible economies in which to do business and is free of the complications of employment contracts, redundancy legislation, and pay parity regulations, MSP models have been deployed to handle multiple vendors, a competitive environment, and technology in a single language with a single set of legislative constraints. Key Components in Managing a Global Contingent Workforce Program 1

4 In contrast, a global program has to focus on addressing flexible workforce management. As the contingent workforce management space has grown, matured, and begun global expansion, it is no longer sufficient for new solutions to replicate what has been done in the United States. Instead of deploying a U.S. model worldwide, internationally savvy companies have taken the program design a level higher by creating a global strategy based on common goals and tailoring the local solutions based on local market conditions, labor legislation, and local customs. The result of this approach is a more flexible and agile program that works seamlessly across borders. When evaluating global workforce management programs, a number of factors must be considered: Talent shortages and escalating wages for in-demand skill sets vary by region Level of compliance with labor laws by local suppliers n Risk associated with co-employment increases n Risk associated with brand reputation damage increases Productivity potentially impacted by high attrition within certain in-demand skill sets Variations in legislative and market conditions is essential Evaluate total cost of ownership (because local cost of deployment and realized value of benefits can vary) One global strategy should encompass localized program components. For example: In many markets, legislation requires hybrid supply models driving better results Local language and culture can create need for technology customization Local business leaders engaged in the early stages of evaluation can identify nuances that are unique to a particular region Global programs should be designed to accommodate local market variances. For example: Australia and New Zealand have similar market dynamics to the US and UK China is an example of a complex market with distinct criteria n Requires mandatory two-year employment period for contingent workers n Requires alternate invoicing process to avoid double taxation of the supply chain Japan, Korea, and China all maintain double dispatch rules prohibiting subcontracting Philippines is unique in its region n Local labor laws prohibit contract staff n Flexible workforce deployed through outsourcing solutions where supplier deploys the required resources from their own employees 2 Key Components in Managing a Global Contingent Workforce Program

5 Critical Considerations for Structuring Your Global Contingent Workforce Program Selecting the Right Program Model What program models currently exist to help you manage your contingent labor force? What are the objectives and benefits of each model? Identify and understand the critical elements that define your program. Understanding Your Labor Market Landscape What are your main considerations when designing your global program? How does global supply work? Where would your program have the biggest impact? The quickest wins? How will market maturity, labor legislation, and technology choices impact the goals of your program? And how would you prioritize the objectives of your program? Internal Considerations What do you need to consider internally to make your program successful? What are the organizational barriers that may exist within your organization that will hinder program success? In addition to explaining the value that can be driven through an MSP program, this paper addresses the challenges and considerations relevant to the transition of domestic programs to global solutions. It may also provoke additional questions internally, as its primary goal is to serve as an initial starting point and discussion tool for HR and procurement executives who are leading strategic contingent labor discussions within their organizations. Selecting the Right Program Model In choosing the right program management model for your contingent labor program, you first need to understand the models that are typical solutions to common problems, evaluate your program goals against those solutions, and then factor in local considerations that incorporate the market maturity of each model. Defining the Models First, let s take a look at the three program management models that are available for contingent workforce management, as defined by Staffing Industry Analysts (SIA). 1. Managed Service Provider (MSP) A company that takes on the primary responsibility for managing an organization s contingent workforce program. Typical responsibilities of an MSP include overall program management, reporting and tracking, vendor selection and management, and order distribution. An MSP may or may not be independent of a staffing supplier. 2. Master Vendor (also known as Master Supplier) A staffing vendor that takes overall responsibility for providing a client with temporary and contract staffing services. In a Master Vendor relationship, all orders will usually go first to the Master Vendor to either be filled or distributed to secondary vendors. Often, the Master Vendor has a defined time period, say 48 hours, to fill the order before releasing the order to secondary vendors. Key Components in Managing a Global Contingent Workforce Program 3

6 3. Hybrid Model A contingent workforce program management strategy that involves blending different sourcing model attributes. Typically, a Hybrid Model would include elements of Vendor Neutral MSP as well as Master Vendor programs. For example, a buyer might engage a single vendor to act as the sole provider for its Light Industrial job requisitions while having multiple suppliers competitively bid on IT positions Typical MSP Framework Understanding Your Program Objectives Before you can select a model, you must first examine your organization s objectives for deploying a contingent workforce management program. You ll want to look at your own internal core competencies, organizational resources, and knowledge of best practices. This will partially drive what type of model you will need to achieve your desired results. There is a distinct difference in focus between the MSP, Master Vendor, and Hybrid Models. Organizations must determine whether to pursue an MSP engagement model that serves as a procurement extension or a Master Vendor model that focuses on supply. For example, if your program objective is a dedicated focus on program management of the contingent workforce, rather than the actual staffing or supply function, then the MSP model would make sense. The MSP manages your contingent workforce on your behalf, acting as an extension of your procurement or HR group. With an emphasis on program efficiency, cost savings, and candidate quality, vendor neutrality is often a key trait. This neutrality ensures vendor competition and protects the client against any unfair bias towards a particular staffing vendor. In contrast, if you have a fairly homogenous contingent workforce and your program objective is a full pipeline of readily available candidates, this would be a prime opportunity for the Master Vendor model, where a single vendor might excel at building this pipeline. 4 Key Components in Managing a Global Contingent Workforce Program

7 The Master Vendor represents the sell-side (the staffing vendor) rather than the buy-side (your procurement or HR group). As the primary or exclusive staffing vendor, the Master Vendor takes on some of the responsibilities of the MSP, but the focus and intent of the relationship is the supply of labor. Organizations with several different workforce needs or regions may opt for a Hybrid Model that combines the best of both models. Depending on the market maturity of your program locations as well as your proposed headcount and workforce mix for those locations, MSP may not deliver the efficiencies and cost savings that you re looking for in a program. Further, this type of model may even be prohibited in some less developed markets. You may elect to choose an overall program model for your global contingent workforce, while remaining flexible enough to adjust that model for local market conditions. Define Globally, Modify Locally If you examine the cultural needs and labor legislation of your global locations, you ll find that what works in the U.S. will not always work elsewhere around the world. The drivers, assumptions, capabilities, and challenges of putting people to work are very often unique to a particular country. You ll want to work together with your global stakeholders to identify and articulate your organization s global program objectives, develop a global project charter, and set a global baseline of processes. Then, when you get to each country, you will need to modify as necessary. The key factors that impact how this plays out fall into three categories: 1. Cultural Forces: For markets where MSP is relatively new, the introduction of vendor neutrality disrupts many programs, especially those in emerging markets where there are a handful of established local providers. This is where one must consider the strategic fit of bundled services (for instance, when the MSP is also a part of the vendor network). In the end, neutrality is often not an option. Driving neutrality through a program in many locations seems to contradict the reason for having a supply partnership at all. Conversely, telling a U.S. manager to go with a sole supply program because it is effective in Malaysia will not work either. 2. Legal Regulations: Legal regulations can have an impact on possible solutions. For example, temporary workers are illegal in Thailand and the Philippines. In 2008, China enacted pay and wage parity laws coupled with a two year minimum assignment requirement. German legislation makes it virtually impossible to terminate workers. Varied legislation in some countries makes it impossible to replicate the MSP model. It may be possible to address needs by having contingent workers provided under Statements of Work. A thorough understanding of local legislation is critical to the execution of a successful program. Key Components in Managing a Global Contingent Workforce Program 5

8 3. Individual Economics: Companies use contingent workers as a way to reduce cost through increased flexibility. This model has cost savings advantages to a point. After years of use, however, many companies will have leveraged the margins in their temporary programs and further significant rate or margin based cost savings are limited. There are a number of different ways to approach a global deployment or expansion of an existing program, but in every case, certain details should be closely examined: While the global objectives and priorities of the company should establish the foundation of the solution, identifying and addressing local needs can improve the realized benefit of the program and drive adoption and successful change management. Local Objectives & Priorities Global & Local Technology Capability Global & Local Resources Global experience is just as essential as local capability and industry knowledge. Ideally, you will benefit most from a vendor that can guide you through the process of program expansion in each region, rather than looking at the needs of a single country one at a time. Global & Local Vendor Capability Regulatory & Financial Dynamics Internal and External limitations are important to categorize early in the process. Additionally, there are often unique capabilities that arise during this assessment that can drive additional value through the program if incorporated into the solutions design. Bottom Line There is no reason that a country that requires a different labor delivery model cannot be part of a larger program. Understanding Your Labor Market Landscape Understand Global Supply The next step that all organizations should take when considering global contingent workforce programs is gaining a clear understanding of what countries make the most sense to include in your program expansion. Mapping out the countries you plan to enter will shape your program. The figure below shows a conceptual map of the labor spectrum. Using more than economic factors to shape your implementation strategy can keep you focused on quick wins and assist in planning for more complicated roll outs. 6 Key Components in Managing a Global Contingent Workforce Program

9 Comparative Analysis of MSP Market Adoption and Regulation The evaluation of a selection of countries for MSP offerings, adoption, and level of legislative restriction identified a number of trends. Local regulations have substantial impact on the efficiency and opportunity that can be derived through an MSP. Many countries have ideal regulatory structure and labor supply, but have yet to adopt MSP on a wide-scale. Please note not all countries are included in this initial depiction. 1 Relative rank calculated based on active regulations related to contractual terms, costs or labor and termination, hiring and firing restrictions, and enforced consequences 2 Relative rank determined by MSP Awareness, Knowledge, and Adoption Find Your Biggest Impact When it comes to the specifics of starting a global program, there are some fundamental tenets that help speed time of creation and set your company up for the best possible deployment. The visual below walks through the classification process. Find locations with the biggest impact; then consider the next boxes as you categorize and rank your markets. Identify Your Largest Business Demand This is the single biggest factor in creating your vision. Where is your volume? Where is there already high demand and usage for labor, contingent or otherwise? What countries are targeting for growth? Find similarities. Are there other programs that, in principle, seem close to what you are already doing in your domestic program? Finding business units that have a more central structure may be a good place to start, leaving the fiefdoms for phase two. Segregate by Supply Model Compare Cultures Understand cultural dynamics. Is language a significant barrier? Does the working calendar look the same? Is this an emerging, developing or developed market? If it is difficult to get baseline information at the outset, rolling out a program may be challenging. Learn the rules of engagement. Why do seemingly compatible countries not share a program? Usually legislation that requires a modified solution is greater than the return of including the country in a program. Creating these programs may force a later implementation than the MSP mature countries. Investigate Employment Legislation Key Components in Managing a Global Contingent Workforce Program 7

10 Internal Considerations Change Management is Critical Start Early Practical planning, an open mind, and a time scale for investment are good starting points for discussion when creating your program. As with every large program, executive buy-in is a must, which often means key business leaders must be engaged and agree to support the program. Do not underestimate the importance of engaging key stakeholders within your business during the change management phase. Having executive support and end user advocates is invaluable to program adoption. Think about how your company communicates and how readily it accepts change. Communication and engagement throughout the business will enable program acceptance. By understanding your current internal processes, documenting potential challenges related to the change, and sharing them with your MSP partner, you will be better prepared to develop a solution that accounts for your organization s specific business requirements. Organizational Dynamics While mapping out your global program plan, keep in mind that few organizations truly have a global mindset regarding how contingent labor is managed. Reporting relationships often roll up to a country level, and priorities for business initiatives are often country-specific. If this sounds like your organization, consider addressing this as early as possible, preferably before implementation. These types of organizational dynamics could negatively impact your global deployment. A phased global implementation approach can partially address this challenge. This approach will provide the necessary time to define global goals and objectives, propose a solution that addresses these needs, and gather local requirements to validate this solution locally. Global Considerations in Selecting Technology A global deployment increases the complexity in your Vendor Management System (VMS) technology selection. If possible, technology decisions should be made only after you have a clear program management strategy that defines the requirements for the technology. Whether you choose the technology in conjunction with your MSP partner or as a separate initiative, your selection should be based on a jointly created list of requirements. When selecting a VMS technology for your global contingent workforce program, you need to consider the following factors: Inclusion of global capabilities defines the top tier of VMS tools Global capabilities are much more than multiple languages and currencies Local legislation can be significantly more complex than the VMS tools are built to handle ntime interpretation ndifferences between temp/contractor pay rates In most cases, picking technology to support a contingent workforce solution globally means choosing the least bad option. 8 Key Components in Managing a Global Contingent Workforce Program

11 Your approach to technology should be just as flexible as all other aspects of your program. In other words, it is not recommended that a program be built based on a single technology. The Future of Global Workforce Management The expansion of contingent labor programs on a global level is here to stay, and as your business evolves, so will your options regarding how to manage your workforce globally. Those organizations with a vision of what success looks like, a well formulated engagement strategy, and the right partnerships will gain a unique, competitive advantage. As you evaluate your current initiatives and long-term objectives, consider these closing thoughts: Expanding your workforce program globally is not a question of if, but a matter of when and how. Chances are, your competitors are already moving in this direction. When expanding, the same principles of partnership apply. You ve already gone through the process of vetting the best domestically; similar principles apply globally, even if the players are different. Leverage your best practices but be flexible and make the program your own. Your previous successes are a good foundation for framing the new program, and keeping an open mind will assure you have the best competitive program for your company. It can be a big shift from current operations but with the right team, the right approach, and the right MSP partner, creating a global strategy is just the next step in the evolution of your workforce programs. COMMIT TO CONTINUOUS IMPROVEMENT: Your workforce is a fluid entity that changes with attrition, growth, and restructure and the management strategy for it needs to be modified as needs and priorities evolve. Where is MSP Heading? MSP Industry Evolution Major Milestones 1990s Creation of a U.S contingent program 2004 Technology Expansion Globalization 2008 Vendor Neutrality Today Expanded Scope What s next? Integrated Resource Fulfillment Managed Service Provider (MSP) Regional Global Varied Skill Categories All Skill Categories Fundamental Technology Advanced VMS Select Industries All Industries Basic Reporting Analytics & Business Intelligence Outsourced Workforce Solutions 1099 and SOW/deliverables management Inclusion of Recruitment Process Outsourcing or Business Process Outsourcing Alternative contingent labor sourcing models Complete enterprise-wide workforce visibility Total cost of ownership savings Key Components in Managing a Global Contingent Workforce Program 9

12 About TAPFIN TAPFIN is a leading managed service provider (MSP) dedicated to the innovation and delivery of integrated workforce management solutions worldwide. TAPFIN s customized, scalable MSP solutions for contingent and project-based spend are instrumental in driving process, performance and productivity improvements across the client organization, while providing risk mitigation and overall cost reduction. Part of ManpowerGroup Solutions, the outsourced services offering from ManpowerGroup, TAPFIN offers a complete suite of workforce management solutions that fully leverages a blend of global expertise and local knowledge About ManpowerGroup Solutions ManpowerGroup Solutions provides clients with outsourcing services related to human resources functions, primarily in the areas of large-scale recruiting and workforce-intensive initiatives that are outcome-based, thereby sharing in the risk and reward with our clients. Our solutions offerings include Talent Based Outsourcing, Managed Service Programs, Borderless Talent Solutions and Recruitment Process Outsourcing, where we are one of the largest providers of permanent and contingent recruitment in the world. 100 Manpower Place Milwaukee WI 53212

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